The Olympics pose a programming dilemma for TV networks that aren't airing the games: Do you offer up your best shows and compete for viewers, or wave the white flag and surrender?
Discovery chose the latter, moving up its annual Shark Week marathon on Discovery Channel to late June to avoid competing in the U.S. against NBC's Olympics coverage, which starts Friday. It didn't go well, with ratings down from the previous year, the company said Tuesday after announcing second-quarter results.
"We made a mistake," Chief Executive Officer David Zaslav said on a conference call. "We wanted to get out of the way of the Olympics, but I think in retrospect I think that was too early. There were a lot of people still working."
Fortunately for Discovery, the decision didn't sink results for the quarter. The company, also home to Animal Planet and TLC, posted earnings of 71 cents a share, excluding items, beating the 58-cent average of analysts' estimates. Sales of $1.71 billion matched projections. The shares rose as much as 6.9%, the biggest intraday jump in five months, after Discovery raised its profit forecast for the year, citing increasing international pay-TV revenue.
Comcast's NBCUniversal has the U.S. broadcast rights to the Olympics and expects to get more than $1 billion in advertising sales by reaching live audiences for 17 days. Discovery holds the rights to the Olympics in Europe and will soak up ad revenue there.
Still Discovery said it expects advertising sales to slow in the third quarter, partly because of NBC's Olympics coverage absorbing much of the U.S. TV advertising market. It's not the only media company bracing for a tough two weeks of competition.
During an earnings call last month, Netflix executives said they expect the Rio Olympics to slow subscriber additions in the quarter. Tribune, which owns WGN America, said it launched two of its biggest shows, "Outsiders" and "Underground," in the first quarter of this year to avoid the Olympics and "the noise" of the presidential campaign this summer. Scripps, owner of HGTV, expects third-quarter revenue growth to slow because of the Olympics.
"The Olympics, as they always do, suck advertising dollars out of the market," Discovery's Chief Financial Officer Andy Warren said during the call.
It's unclear whether NBC's $1 billion-plus Olympics haul is coming at the expense of its rivals, or if it's getting new ad dollars that weren't being spent on TV commercials, said Paul Sweeney, an analyst at Bloomberg Intelligence.
"The question is: How much of it is new ad spending versus spending being shifted from other networks?" Mr. Sweeney said.
When Shark Week airs during its normal time period in early August, viewership typically surges because people "are just hanging out" with their kids during "the dog days of summer," Mr. Zaslav said. Discovery will go back to airing Shark Week in late July or early August next year, "where we found the most success," he said.
-- Bloomberg News